The Number of Nearest-in-Time Potential American Critical Heavy Rare Earths Producers is Increased by One: The Coming Rare Earth Junior Mining Cull, Crystal Balls and Brass Balls
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Jack Lifton is an Independent consultant and commentator, focusing on the market fundamentals and future end use trends of the rare metals. He specializes in the sourcing of nonferrous strategic metals and on due diligence studies of businesses in that space. His work includes exploration, mining, refining and the recovery of metal values by the recycling of not only metals and their alloys but also of metal-based chemicals used as raw materials for component manufacturing.
Mr. Lifton has more than 55 years of experience in the global OEM automotive, heavy equipment, electrical and electronic, mining, smelting, and refining industries. His background includes the sourcing, manufacturing, and sales of platinum group metal products, rare earth compounds, and ceramic specialties used to make catalytic converters, oxygen sensors, batteries, and fuel cells. He is knowledgeable in locating and analyzing new and recycled supplies of 'minor metals' including tellurium, selenium, indium, gallium, silicon, germanium, molybdenum, tungsten, manganese, chromium, and the rare earth metals.
Today he primarily consults to institutional investors doing due diligence on metals related opportunities and to natural resource ventures on technologies and markets.
Jack wrote a weekly column on minor metals for Resource Investor for three years until December 2008, during which he authored more than 125 original articles. He is also speaks on minor metals fundamentals and end-uses at private, public, and professional meetings. Since 2008 Jack has written more than 400 articles, and since 2007 he has made presentations at conferences, seminars, and workshops all over the world more than 100 times.
Rare Element Resources Ltd (REE.AMEX) today issued a press release that makes very good reading for the American civilian and military industrial manufacturing sector. REE now joins Ucore as having a high potential for producing the critical rare earths, dysprosium, terbium, europium, and neodymium in commercial quantities. Additionally REE could produce samarium, gadolinium, and yttrium in notable and certainly commercial quantities thus joining Ucore (UURAF,PK) in that capacity.
So now there are two potential domestic American HREE producers that I think are viable and have high probabilities of commercial success.
The sole free market criterion for measuring the value of a company is profitability. For "junior" mining companies, all of which are mineral exploration ventures organized to explore for and verify valuable deposits of minerals that can be either developed by the junior or sold by it to a mining company for development as a profitable venture, Profitability in the junior mining space almost always means the difefrence between the sale price for the deposit and the cost of getting to a saleable point..
Thus junior miners are speculative ventures, which, in a fair and balanced world, would be rated as much by their management experience and marketing skills as by the economic value of their deposits.
Unfortunately this is not the case.The measue of success (metric) used in the junior mining world is the previous experience of the particular promoters involved in successful past promotions especially in gold, the forever fad and, most recently, uranium.
Human nature is to create fads and measure the worth of individuals by their adherence to the particular "narrative" of the latest fad. For the last three years the promotional aspect of the stock markets based in Vancouver, Toronto, Sydney, Perth, Frankfort, London and New York have been suucessfully promoting a rare earth boomlet. Various pundits and money managers have spun stories of the importance of the rare earth metals beyond any recognizable common sense logic in order to lower the bar for entry to the rare earth junior mining corral.
Some rare earth metals are indeed very important for the maintenance of the mass production of the miniaturized electronic devices that the younger among us believe have always existed and have always been available cheaply and abundantly.
The total conversion of our technological society's electric motors and generators to smaller and more powerful types using rare earth permanent magnets is nearing completion. Rare earth permanent magnets, particularly of the neodymium-iron-boron metallurgy dominate the market for permanent magnets for all uses.
Interestingly enough, of the very small percentage of neodymium-iron-boron magnet powder and solid alloy imported into the USA for the production of rare earth permanent magnets most is used by high tech civilian industry such as that for medical imaging devices. Only a smaller amount of the total is used for significant military devices. For example, just a tiny amount of the rare earth metal, samarium, is imported into the USA for direct conversion here into samarium cobalt alloy for rare earth permanent magnets exclusively for the US military,
I doubt that more than 500 tons in total of magnet alloy as raw materials are imported into the USA each year for magnet fabrication, and of that amount I seriously doubt that more than 100 tons is used exclusively for military production.
At least 90% of the world's rare earth permanent magnets are made in China (60% and Japan, 30%). The alloys from which they are made are produced almost entirely (95%) in China from rare earth metals produced domestically there.
Anyone in the USA who is planning to manufacture rare earth permanent magnets from domestically (USA) produced rare earth metals is facing the situation that:
1. No rare earth ores have been mined in North America in the 21st century,
2. No American company using American developed technology has produced rare earth metals in the USA in the 21st century,
3. No American company has made neodymium-iron-boron magnets from the individual rare earth metals in the USA since, at least 2004. Electron Energy Inc in Lancaster, Pa. has however made smaraium-cobalt rare earth permanent magnet alloys and magnets. The company, I believe, has entered into an off-take with Great Westernn Minerals Group (OTC:GWMGF) for rare earth metals to be produced by that company's Less Common Metals subsidiary from its, GW's, mining and refining operations in South Africa.
4. Only a small overall tonnage of rare earth permanent magnets are currently produced in the USA from a rare earth metal base, and, critically,
5. All of the dysprosium used to modify the heat cycle sensitivity of rare earth permanent magnets, which is critical in their largest end-use, "under the hood" applications in the OEM automotive industry, as well as in their military use, is and always has been produced in China.
Just two of the US junior mining ventures currently in development, principally Ucore (UURAF.OTCF) in Alaska and Rare Element Resources (REE.ASE) in Wyoming could produce dysprosium in commercial quantities in time for the American military and industrial complexes to free themselves of Chinese monopolizing of the rare earth space in general and of the heavy rare earths in particular, before the liklihood of the discontinuing of the export of dysprosium by China either in or before 2015.
America needs between 5,000 and 10,000 metric tons a year of lanthanum (90%) and cerium.(10%) in order for the fluid cracking catalyst manufacturing industry toremain based mainly in the USA. America also needs 4,000 tons, at most, of neodymium to manufacture all of the rare earth permanent magnets used in every application in the USA today rather than import most of them from China and Japan-this estimate may be too high-and America needs between a minimum of 400 and a maximum of 1200 tons of dysprosium to modify those magnets so that they can be repeatedly exposed to heating and cooling cycles (such as "under the hood") and retain their original properties. Also if America has 100 tons a year of domestically produced terbium it could dominate the world of non incandescent lighting if it so desired.
Some of the above high tonnage production is simply not possible in the USA. Particularly amounts of dysprosium of more than 300 tons per year and of less than 60 tons of terbium, at most.
For critical applications investors should look first to those who can in fact produce dysprosium and terbium and, of course lanthanum and neodymium.
All of the emphasis so far has been on lanthanum, cerium, and neodymium, but only one of those, neodymium, is really a critical metal that I believe is even now in short supply.
The important critical rare earth metals are now dysprosium and terbium because they are not produced in the USA but are necessary for the high tech devices of which America is the largest per capita consumer..
The smart play is clearly to support those who can produce the most critical of the rare earths by also buying all of the lanthanum, cerium, and neodymium that they can produce. Rare Element Resources and Ucore should be the choice for end users of magnet materials and of lighting materials and of fluid cracking catalyst materials, because by buying out the production of these two companies in total American companies can be assured of independence from Chinese decisions on allocation.
Disclosure: I am long OTC:GWMGF.
So now there are two potential domestic American HREE producers that I think are viable and have high probabilities of commercial success.
The sole free market criterion for measuring the value of a company is profitability. For "junior" mining companies, all of which are mineral exploration ventures organized to explore for and verify valuable deposits of minerals that can be either developed by the junior or sold by it to a mining company for development as a profitable venture, Profitability in the junior mining space almost always means the difefrence between the sale price for the deposit and the cost of getting to a saleable point..
Thus junior miners are speculative ventures, which, in a fair and balanced world, would be rated as much by their management experience and marketing skills as by the economic value of their deposits.
Unfortunately this is not the case.The measue of success (metric) used in the junior mining world is the previous experience of the particular promoters involved in successful past promotions especially in gold, the forever fad and, most recently, uranium.
Human nature is to create fads and measure the worth of individuals by their adherence to the particular "narrative" of the latest fad. For the last three years the promotional aspect of the stock markets based in Vancouver, Toronto, Sydney, Perth, Frankfort, London and New York have been suucessfully promoting a rare earth boomlet. Various pundits and money managers have spun stories of the importance of the rare earth metals beyond any recognizable common sense logic in order to lower the bar for entry to the rare earth junior mining corral.
Some rare earth metals are indeed very important for the maintenance of the mass production of the miniaturized electronic devices that the younger among us believe have always existed and have always been available cheaply and abundantly.
The total conversion of our technological society's electric motors and generators to smaller and more powerful types using rare earth permanent magnets is nearing completion. Rare earth permanent magnets, particularly of the neodymium-iron-boron metallurgy dominate the market for permanent magnets for all uses.
Interestingly enough, of the very small percentage of neodymium-iron-boron magnet powder and solid alloy imported into the USA for the production of rare earth permanent magnets most is used by high tech civilian industry such as that for medical imaging devices. Only a smaller amount of the total is used for significant military devices. For example, just a tiny amount of the rare earth metal, samarium, is imported into the USA for direct conversion here into samarium cobalt alloy for rare earth permanent magnets exclusively for the US military,
I doubt that more than 500 tons in total of magnet alloy as raw materials are imported into the USA each year for magnet fabrication, and of that amount I seriously doubt that more than 100 tons is used exclusively for military production.
At least 90% of the world's rare earth permanent magnets are made in China (60% and Japan, 30%). The alloys from which they are made are produced almost entirely (95%) in China from rare earth metals produced domestically there.
Anyone in the USA who is planning to manufacture rare earth permanent magnets from domestically (USA) produced rare earth metals is facing the situation that:
1. No rare earth ores have been mined in North America in the 21st century,
2. No American company using American developed technology has produced rare earth metals in the USA in the 21st century,
3. No American company has made neodymium-iron-boron magnets from the individual rare earth metals in the USA since, at least 2004. Electron Energy Inc in Lancaster, Pa. has however made smaraium-cobalt rare earth permanent magnet alloys and magnets. The company, I believe, has entered into an off-take with Great Westernn Minerals Group (OTC:GWMGF) for rare earth metals to be produced by that company's Less Common Metals subsidiary from its, GW's, mining and refining operations in South Africa.
4. Only a small overall tonnage of rare earth permanent magnets are currently produced in the USA from a rare earth metal base, and, critically,
5. All of the dysprosium used to modify the heat cycle sensitivity of rare earth permanent magnets, which is critical in their largest end-use, "under the hood" applications in the OEM automotive industry, as well as in their military use, is and always has been produced in China.
Just two of the US junior mining ventures currently in development, principally Ucore (UURAF.OTCF) in Alaska and Rare Element Resources (REE.ASE) in Wyoming could produce dysprosium in commercial quantities in time for the American military and industrial complexes to free themselves of Chinese monopolizing of the rare earth space in general and of the heavy rare earths in particular, before the liklihood of the discontinuing of the export of dysprosium by China either in or before 2015.
America needs between 5,000 and 10,000 metric tons a year of lanthanum (90%) and cerium.(10%) in order for the fluid cracking catalyst manufacturing industry toremain based mainly in the USA. America also needs 4,000 tons, at most, of neodymium to manufacture all of the rare earth permanent magnets used in every application in the USA today rather than import most of them from China and Japan-this estimate may be too high-and America needs between a minimum of 400 and a maximum of 1200 tons of dysprosium to modify those magnets so that they can be repeatedly exposed to heating and cooling cycles (such as "under the hood") and retain their original properties. Also if America has 100 tons a year of domestically produced terbium it could dominate the world of non incandescent lighting if it so desired.
Some of the above high tonnage production is simply not possible in the USA. Particularly amounts of dysprosium of more than 300 tons per year and of less than 60 tons of terbium, at most.
For critical applications investors should look first to those who can in fact produce dysprosium and terbium and, of course lanthanum and neodymium.
All of the emphasis so far has been on lanthanum, cerium, and neodymium, but only one of those, neodymium, is really a critical metal that I believe is even now in short supply.
The important critical rare earth metals are now dysprosium and terbium because they are not produced in the USA but are necessary for the high tech devices of which America is the largest per capita consumer..
The smart play is clearly to support those who can produce the most critical of the rare earths by also buying all of the lanthanum, cerium, and neodymium that they can produce. Rare Element Resources and Ucore should be the choice for end users of magnet materials and of lighting materials and of fluid cracking catalyst materials, because by buying out the production of these two companies in total American companies can be assured of independence from Chinese decisions on allocation.
I also urge American civilian and military industry to support vertical integration the rare earth permanent magnet industry and the phosphor industry. America has all of the technology to transform rare earth ore conentrates, the first item in the rare earth end use product supply chain into finsihed magnets and CFLs. Yet we have simply abandoined these industrial steps, all of them, actually, for momentary cheaper prices.
Since neither Ucore nor RER could provide individually or even together enough lanthanum and neodymium for the American fcc industry or a revived domestic magnet manufactruing industry the smart play for end-user procurement is to form a buying group and to enter into off-take agreements for the entire outputs of RER and Ucore and to divide up the critical materials among themselves
Since neither Ucore nor RER could provide individually or even together enough lanthanum and neodymium for the American fcc industry or a revived domestic magnet manufactruing industry the smart play for end-user procurement is to form a buying group and to enter into off-take agreements for the entire outputs of RER and Ucore and to divide up the critical materials among themselves
Additional lanthanum, cerium, and neodymium needed by American industry can be purchased from Molycorp which can then dedicate the balance of its enormous production of light rare earths to rich overseas markets such as Japan, Korea, India and China itself.
I urge the management of RER and Ucore to determine their actual cost of production of all of the rare earth metals individually and then offer them to a procurement operation at a known level of profit and a predictable cost for the buyer.
The two mining companies will be very profitable and the end users will continue to be able to utilize rare earths in their products and thus compete with Chinese industries that will continue to have easy access to raw materials the prices of which are now climbing within China along with labor, regulatory, health, and safety costs.
It is obvious that if Molycorp's projections are accurate then it will be producing at lower costs than the Chinese. At that point Molycorp can sell its output to the world's largest consumer of its products, China, as well as to Japan, which today sources from China exclusively.
If American self-sufficiency to insure that our civilian and military manufacturing industries retain their market share and can grow is important then those sectors of our economy must strike bargains with and buy from Rare Element Resources and Ucore to ensure their own prosperity as well as that of you and me.
I urge industry, both civilian and military, to grow a pair, work together, and get the ball(s) rolling beofre America becomes an industrial backwater.
I urge the management of RER and Ucore to determine their actual cost of production of all of the rare earth metals individually and then offer them to a procurement operation at a known level of profit and a predictable cost for the buyer.
The two mining companies will be very profitable and the end users will continue to be able to utilize rare earths in their products and thus compete with Chinese industries that will continue to have easy access to raw materials the prices of which are now climbing within China along with labor, regulatory, health, and safety costs.
It is obvious that if Molycorp's projections are accurate then it will be producing at lower costs than the Chinese. At that point Molycorp can sell its output to the world's largest consumer of its products, China, as well as to Japan, which today sources from China exclusively.
If American self-sufficiency to insure that our civilian and military manufacturing industries retain their market share and can grow is important then those sectors of our economy must strike bargains with and buy from Rare Element Resources and Ucore to ensure their own prosperity as well as that of you and me.
I urge industry, both civilian and military, to grow a pair, work together, and get the ball(s) rolling beofre America becomes an industrial backwater.
Disclosure: I am long OTC:GWMGF.